Financial Ratios as Predictors of Bankruptcy in Slovenia A comparison by ramhood15

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									    Financial Ratios as Predictors of Bankruptcy in Slovenia: A comparison of non-
               parametric, semi-parametric and parametric techniques.

                                            Abstract

Financial stability of companies is of concern to employees, investors, bankers and
government and regulatory authorities alike. Indeed, recent literature on global financial
downturns includes the theory that balance sheet fundamentals may provide warning of
impending crisis. This paper presents five alternative techniques that can be used in a study
regarding financial ratios as predictors of Slovenian corporate failure, evidenced as
bankruptcy. First, non-parametric and parametric techniques are compared in the variable
selecting process. Second, semi-parametric techniques and standard logit model are discussed
in predicting default. The case of Slovenia is chosen, since it is a transition country and a new
member EU state, with the financial market still underdeveloped relative to the »old« EU. In
such an economy development of robust models for predicting bankruptcy is of immense
value.




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